Term Insurance Explained: T10, T20, Renewals & LLQP Exam Basics
Term insurance provides pure life insurance protection for a fixed period — 10 years, 20 years, or to a set age like 65 — with no cash value and the lowest initial premium per dollar of coverage.
Why it matters on the LLQP exam
Term is the foundation of the Life Insurance module, and its job is temporary needs: a mortgage, income replacement while children are young, or covering a business loan.
Core features to lock in:
- Level premiums for the term. A Term 10 premium stays flat for 10 years, then jumps at renewal based on the insured's attained age.
- No cash value, no savings element, no non-forfeiture values. If you stop paying, the coverage simply ends. Any answer option that gives term insurance a cash value is wrong.
- Renewable and convertible versions dominate the market. Renewable term guarantees the right to continue without new medical evidence; convertible term guarantees the right to swap into permanent insurance, again without evidence.
- Term to 100 is the oddball: permanent-style coverage priced like term, usually with no meaningful cash value.
The exam's favourite framing is cost: term has the lowest initial premium for a given face amount, which makes it the right answer for short-term, high-need situations on a tight budget. The flip side it tests just as often: renewal premiums rise steeply with age, so term becomes expensive as a lifetime solution.
Example question
Which statement about term life insurance is correct?
- It builds cash value that the owner can borrow against
- It provides protection for a stated period with no cash value
- Its premium stays level for the insured's entire life
- It pays a maturity benefit if the insured outlives the term
Answer: B — term is pure temporary protection: fixed period, level premium during that period, and no cash value or maturity benefit.
Next, compare the two features that upgrade basic term — renewable term and convertible term — and see the full product landscape in the life insurance and taxation hub.